Case Study #1 Forgiveness of Debt by Owner 25 points

(Developed by AICPA Financial Reporting Alert & Modified)

Facts: The owner of a thinly capitalized company decides to forgive debt owed to him by his company. He asks if the company can recognize a gain on forgiveness as income. Currently, APB Opinion No. 26, Early Extinguishment of Debt, indicates that such a gain may be, in essence, a capital transaction.

The guidance resided in paragraph 20 of APB Opinion No. 26.

REQUIRED:

How would you find the codification with the guidance by using the Cross Reference feature?

Copy and paste the paragraph in the current codification that states the guidance on recognizing this gain.

How would you find the original standard using Cross Reference feature?

What would you do to find the Codification using the search feature?

What is the step-by-step trail you would select/follow if you were to use the Topical Structure, on the left menu bar, to find the Codification?